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Mining Pool Reward Methods

Mining Pool Reward Methods. Bitcoin 2013, San Jose Meni Rosenfeld Bitcoil. Outline. Mining primer Simple reward methods PPS Proportional Advanced methods DGM Reward method triangle Shift-PPLNS The future Questions. Mining primer. Bitcoin mining exists to:

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Mining Pool Reward Methods

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  1. Mining Pool Reward Methods Bitcoin 2013, San Jose Meni RosenfeldBitcoil Written by Meni Rosenfeld

  2. Outline • Mining primer • Simple reward methods • PPS • Proportional • Advanced methods • DGM • Reward method triangle • Shift-PPLNS • The future • Questions Written by Meni Rosenfeld

  3. Mining primer • Bitcoin mining exists to: • Determine initial distribution of coins • Synchronize transactions • Miners calculate hashes in an attempt to find blocks and be rewarded with bitcoins Written by Meni Rosenfeld

  4. Mining rewards • One in 232 hashes will be a share • A share has probability p = 1 / D to be a block • Currently D ≈ 10 M • A block is rewarded with B bitcoins • Currently B = 25 (+ tx fees) • Expected reward per share: pB • Example: a 10 GH/s miner finds: • 8K shares per hour (73M per year) • Per year, on average, ~7 blocks (180 BTC) Written by Meni Rosenfeld

  5. Variance • Actual number of blocks found is random • Follows Poisson distribution • Variance is equal to mean • Relative variance: D / #shares • Example: 10GH/s miner, one year, B = 25, D = 10M • Average reward: 180 BTC • Standard deviation: 68 BTC • Reward range: 25 – 350 BTC Written by Meni Rosenfeld

  6. Mining pools • Group of people mining together sharing rewards • Relative variance based on combined hashrate • Allows continuous rewards similar to expectation • Contribution is measured by number of shares • Actual calculation of rewards is not trivial! • Hence the need for (and variety of) “reward methods” Written by Meni Rosenfeld

  7. PPS (Pay per share) • Pool operator takes an active role • Pays miners a fixed amount pB per share (minus fees) • Operator keeps all block rewards • Advantages: • Simple • Miners completely shielded from randomness and variance • Payment sent instantly Written by Meni Rosenfeld

  8. PPS (Pay per share) • The problem • Variance is entirely assumed by pool operator • Operator requires high fees to compensate for risk • Bankruptcy chance: • Still viable • But difficult to get right Written by Meni Rosenfeld

  9. Proportional • Mining is organized into rounds • Finding a block ends previous round and starts new one • Block reward distributed among miners in latest round in proportion to shares they submitted this round • Operator has no risk; miners do have variance • Problem: Method is completely broken! Written by Meni Rosenfeld

  10. Pool hopping In good times… and in bad? Written by Meni Rosenfeld

  11. Pool hopping • Proportional method based on wrong intuition • Suitable for deterministic tasks • Not for random, memoryless tasks • Reward per share = B / (#shares in round) • #shares in round = #past shares + #future shares • #future shares unknown but always look the same • #past shares is known and variable! • Mining most lucrative when #past shares is low Written by Meni Rosenfeld

  12. DGM (Double geometric method) • When miner submits a share, his score increases • Score decreases geometrically when: • A share is found • A block is found • Miners are rewarded for blocks according to current score • Independent of everyone else’s scores! Written by Meni Rosenfeld

  13. DGM (Double geometric method) • Reward per share depends only on pool’s future • Hence, method is hopping-proof • Works like a capacitor Written by Meni Rosenfeld

  14. Reward method triangle Written by Meni Rosenfeld

  15. Shift-PPLNS • Work is divided into “shifts” • Ending a shift is arbitrary • But not based on finding blocks! • Miners are paid for shares submitted in last N shifts • Method can work asynchronously • Suitable for scalable, parallel implementations Written by Meni Rosenfeld

  16. Pool landscape Written by Meni Rosenfeld

  17. The future • Currently: “Standard” pools • Pool assigns work to miners • Miners submit proof of completed work • Pool pays miners • Problem: • Pool performance improves with pool size • Mining tends to concentrate at biggest pools • Control of mining is centralized Written by Meni Rosenfeld

  18. The future • Some combination of: • Multi-pool mining • p2p pools • Variable-difficulty shares • Smart miners • Distributed insurance agents • Proxy pools • Will allow: • PPS payments (simple, no variance) • Low fees • Decentralization of power Written by Meni Rosenfeld

  19. Questions? Written by Meni Rosenfeld

  20. Thank you • Meni Rosenfeld • meni@bitcoil.co.il • https://bitcoil.co.il • 1DdrvajpK221W9dTzo5cLoxMnaxu859QN6 • “Analysis of Bitcoin Pooled Mining Reward Systems” • https://bitcoil.co.il/pool_analysis.pdf Written by Meni Rosenfeld

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